According to the IRS, a capital gain (or capital loss) is the difference between the amount for which you sell the capital asset and your basis, which is usually what you paid for it. A capital gain occurs if the capital asset is sold for more than the basis, while a capital loss occurs if the capital asset is sold for less than the basis.
Capital assets consist of almost everything you own and use for personal purposes, pleasure, business or investment, including:
- Home/House
- Household furnishings
- Stocks or bonds
- Coin or stamp collections
- Gems and jewelry
- Gold, silver or any other metal
- Business property
The IRS goes into more detail about capital gains and capital assets in this fact sheet.
Capital gains tax rates
Capital gain tax rates - like income tax - range according to the seller's income. Historically, capital gains have been taxed at a different rate than ordinary income. This difference is due to the perception that at least a portion of the gain represents an inflationary component. Namely, the asset's value has grown over the years the asset has been held, rather than a true increase in value.
Capital gains have generally tended to be taxed at the same or a lower rate than ordinary income. The chart below shows the maximum individual and corporate capital gains tax rates from 1913.
The maximum capital gains tax rate for individuals and corporations
| Year | Individual capital gains tax rate |
Corporate capital gains tax rate |
|
1913–1921 |
same as regular rate |
same as regular rate |
|
1922–1933 |
12.5% |
12.5% |
|
1934–1935 |
17.7%* |
13.75% |
|
1936–1937 |
22.5%* |
15.0% |
|
1938–1941 |
15.0% |
same as regular rate |
|
1942–1951 |
25.0% |
25.0% |
|
1952–1953 |
26.0% |
26.0% |
|
1954 |
25.0% |
26.0% |
|
1955–1967 |
25.0% |
25.0% |
|
1968 |
26.9% |
25.0% |
|
1969 |
27.5% |
25.0% |
|
1970 |
30.2% |
25.0% |
|
1971 |
32.5% |
25.0% |
|
1972–1974 |
35.0% |
25.0% |
|
1975–1977 |
35.0% |
30.0% |
|
1978 |
33.8% |
30.0% |
|
1979 |
35.0% |
30.0% |
|
1980–1981 (June 9) |
28.0% |
28.0% |
|
1981 (after June 9 )–1986 |
20.0% |
28.0% |
|
1987–1992 |
28.0% |
34.0% |
|
1993–1997 (May 6) |
28.0% |
35.0% |
|
1997 (after May 6)–2003 |
20.0% |
35.0% |
|
2003 (after May 5)–2012 |
15.0% |
35.0% |
|
2013–2017 |
20.0% |
35.0% |
|
2018-2023 |
20.0% |
21.0% |
*Assumes 10-year holding period, 30% of gain recognized (sliding scale for exclusion based on holding period).
Please note: Tax law is complex. While an accurate representation of capital gains rate history, this chart may not reflect various factors (such as excess profit taxes, phase-ins, rates on special categories of gain and AMT) that could have affected capital gains taxes throughout the years.
Source: Wolters Kluwer CCH® AnswerConnect, 2023
Permission for use granted.